As we see the market for recreational land sales continue to improve, one question continues to bother some prospective buyers: “How do I know if I’m paying a fair price?”
In recreational property sales, the answer isn’t necessarily as simple as, say, comparing the sales prices of homes in a residential neighborhood. After all, one of the benefits of owning land is that each parcel is unique and can be used in many ways, unlike a home that has one purpose and can fairly easily be compared to another home.
And to make this more challenging, property sales have been slow in some rural areas, making it hard for a real estate professional to find applicable pricing to use in a comparative market analysis.
With that in mind, here are five things that buyers should think about related to price, and in turn, value, in a recreational property sale:
- There is no one, simple answer right now as to whether prices are on the rebound for recreational property. This answer will differ depending on the geographic area. That said, in many areas of our home state of Minnesota, we are seeing prices increase, the key sign that prices have bottomed out and are on the rise.
- While it’s important to pay a fair price, there’s more to determining value than simply the sales price. How does a property purchase fit into your overall budget and plans for the future? And if you are seeing prices starting to increase, is it smarter to buy now than to continue to wait?
- In figuring out comps and understanding value, it’s critical to work with a professional who’s an expert in recreational real estate. Selling recreational property requires a unique skill set, and a different type of knowledge than what selling in a subdivision involves. This comes into play in determining sales comps that make sense. Even if there are no recent comparable sales nearby, a knowledgeable recreational real estate pro can use market knowledge and common-sense reasoning to figure out whether a sales price seems fair.
- The notion that there’s no financing available for recreational land is not true. Certainly, it’s a little more difficult to get financing today than it was before the recession took hold. But a number of financial institutions are lending on land. In fact, many recreational real estate professionals have relationships with banks, credit unions and other lenders – just ask them who they know.
- In recreational property sales, you may be wasting your time if you’re waiting for a great deal on a distressed property. Distressed sales in recreational real estate are not nearly as prevalent as they’ve been in urban areas. In our area, about 100 miles north of Minneapolis-St. Paul, we haven’t seen a large number of foreclosures or distressed sales in the second home/recreational property market. So it’s important for buyers to know that most sellers in this niche are not desperate, so a lowball offer may not get you anywhere. Consider what a fair price should be, and work from there.
Natalie Cowart is co-owner, with her brother Tom Jensen, of United Country Banning Junction Real Estate, part of the Potlatch Preferred Broker network. With deep experience in recreational real estate, she specializes in a geographic area that’s midway between the cities of Minneapolis-St. Paul and Duluth.
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